# Cashback v Interest

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I have a Capital One credit card which pays me 1% cashback on everything I buy. I spend approximately £500 per month on it.

I also have a Santander current account which pays me 3% interest. Would I be better off if I got a Tesco credit card with 16 months interest free on purchases and left the money in the current account?

I'm struggling with the maths. Can anyone help me out please?

• Posts: 1,703
Forumite
If you spend a consistent £500 per month, over 12 months you'll average 1.5% on the total balance (1st month 3% on £500, 2nd month 11/12*3% on £500, and so on).

So you'll be better of, yes. Obviously over 16 months, that gets even better (16/12*3% on month 1, 15/12*3% on month 2, etc).

This also relies on them giving you a limit of £8,000 or more, and you'll still need to make min payments.
• Posts: 5 Forumite
Also, doesn't the Santander current account have a limit on the amount you can have in there that earns interest? Look into that, because if it does, that will affect your best option.

To make the decision easier, consider the Aqua credit card. It gives 3% cashback on all purchases (to a maximum of £100 a year). The APR is horrific though so only consider that if you know you'll pay it off in full each month.
March 2013: £10
Presently: £3,7382.32 (All without a job)
• Posts: 31,455 Forumite
Assuming there is no cap on you cashback then over 16 months you'd spend £8000 and earn £80 in cashback, and around £20 in interest (on the £500 sitting in your bank each month before its paid off the card).

With the tesco card assuming you could get an £8k limit and only paid the minimum payment each month you would earn around £140 in interest in your bank account (this will vary depending on when in the month you are making the card purchases).
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• Posts: 1,703
Forumite
Also, doesn't the Santander current account have a limit on the amount you can have in there that earns interest? Look into that, because if it does, that will affect your best option.

To make the decision easier, consider the Aqua credit card. It gives 3% cashback on all purchases (to a maximum of £100 a year). The APR is horrific though so only consider that if you know you'll pay it off in full each month.

The limit is £20,000. However this reminds me, the interest rate is only 3% while you have more than £3k in the account. So in month 1 (£500) you'd earn nothing, month 2-3 (£1000-£1500) 1%, month 3-4 (£2,000-£2500) 2%, so you would only start earning 3% from month 5 onwards. That said, you'd only be worse off in month one.

As for Aqua, this is the reward card Shoestring refers to, which isn't available to new customers any more.
• Posts: 5 Forumite
As for Aqua, this is the reward card Shoestring refers to, which isn't available to new customers any more.

You're right, sorry. Didn't realise that offer had been withdrawn - glad I got in when I did! Also worth bearing in mind the Tesco card offers cashback of sorts as well in the form of clubcard points. I'm not sure exactly which card you're looking at - but doesn't it offer somewhere between 0.5%-1% on purchases in clubcard points?

When taking this into account it becomes a no-brainer, especially if you take advantage of the inevitable double/triple/quadruple points events Tesco runs a couple of times a year.
March 2013: £10
Presently: £3,7382.32 (All without a job)
• Posts: 246 Forumite
Don't forget the discounts on fuel too - received a 10p off a litre of fuel the other day. That's a serious saving in itself.
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Thanks for the replies. I think I'll go for it but I now see that the problem may be the amount of credit I'm given. Once it's used up I'd have to go back to the cashback card.
• Posts: 4,378
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You're right, sorry. Didn't realise that offer had been withdrawn - glad I got in when I did! Also worth bearing in mind the Tesco card offers cashback of sorts as well in the form of clubcard points. I'm not sure exactly which card you're looking at - but doesn't it offer somewhere between 0.5%-1% on purchases in clubcard points?

When taking this into account it becomes a no-brainer, especially if you take advantage of the inevitable double/triple/quadruple points events Tesco runs a couple of times a year.

No the tesco card is 0.25% cashback, so even if you quadruple it its only 1%.

Though I use it as its a cheap way to get avios.
• Posts: 1,703
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callum9999 wrote: »
No the tesco card is 0.25% cashback, so even if you quadruple it its only 1%.

Though I use it as its a cheap way to get avios.

And merely having the Tesco card is enough to get you double points on fuel, even if you only use it as a clubcard and pay with something else.
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